Sweetmotion Limited v The Commissioners for HMRC
Decision date: 5 May 2026
Neutral citation: [2026] UKFTT 657 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This FTT decision considered whether Sweetmotion Ltd’s input tax claims were recoverable given that its suppliers were fraudulent defaulters, applying the Kittel test of (i) fraudulent evasion, (ii) connection of the appellant’s purchases to that fraud, and (iii) the appellant’s knowledge (actual or constructive) of that connection. The Tribunal found HMRC proved fraud and connection but that the director did not actually know; however he should have known from 19 January 2021 (after HMRC’s meeting and guidance), so input tax was denied only for transactions on or after that date. The company penalty under s.69C VATA 1994 was upheld but reduced by 25% for cooperation, and recalculated to apply from 19 January 2021.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
The Tribunal applied the Kittel framework: HMRC must prove on the balance of probabilities (a) fraudulent VAT evasion by others, (b) that the appellant’s purchases were connected to that fraud, and (c) that the appellant knew or should have known of the connection. The judgment supports that a taxpayer may be treated as having “should have known” from the point at which HMRC has given relevant advice/education and, in the context of the totality of circumstances and red flags, the connection to fraud becomes apparent — here fixed to 19 January 2021 after HMRC’s meeting and Notice 726 guidance.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal observed (obiter) that HMRC’s procedural failures — notably delays in raising concerns and not issuing veto letters regarding known fraudulent suppliers — are concerning and may comfort taxpayers, though they do not necessarily prevent a finding that a trader should have known of fraud. It also noted that features such as rapid turnover growth, minimal records, and multiple third‑party payments are collectively indicative of contrivance but may, singly, reflect commercial imprudence rather than culpable knowledge.